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Arch Capital (ACGL) Q2 Earnings & Revenues Beat, Rise Y/Y
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Arch Capital Group Ltd. (ACGL - Free Report) reported second-quarter 2023 operating income of $1.92 per share, beating the Zacks Consensus Estimate by 16.4%. The bottom line increased 43.3% year over year.
The results benefited from improved premiums and higher net investment income on the back of improved Insurance and Reinsurance segment performance.
Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Gross premiums written improved 25.2% year over year to $4.8 billion.
Net premiums written climbed 27.7% year over year to $3.4 billion on higher premiums written across its Insurance and Reinsurance segments and beat our estimate of $3.1 billion.
Net investment income increased 128.3% year over year to $242 million and beat our estimate of $115.3 million. It was driven by higher interest rates and growth in invested assets, which benefited from strong operating cash flows. The Zacks Consensus Estimate was pegged at $185 million.
Operating revenues of $3.2 billion rose 32.6% year over year, driven by higher net premiums earned and net investment income. It beat the Zacks Consensus Estimate by 2.3%.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $119 million.
Arch Capital’s underwriting income increased 13.1% year over year to $606 million. Our estimate was $686.8 million.
The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 270 basis points (bps) to 79.8. Our estimate was 74.1. The Zacks Consensus Estimate was pegged at 8.
Segment Results
Insurance: Gross premiums written increased 14.7% year over year to $2 billion. Our estimate was $2.1 billion.
Net premiums written climbed 18.4% year over year to $1.5 billion, driven by increases in most lines of business, due in part to new business opportunities, increases in existing accounts and rate changes as well as more business in the reported quarter. Our estimate was $1.3 billion.
Underwriting income of $108 million was 11.3% higher than the year-ago number. Our estimate was $173 million. The combined ratio deteriorated 80 bps to 91.9. Our estimate was 85.2.while the Zacks Consensus Estimate was pegged at 90.
Reinsurance: Gross premiums written improved 41.9% year over year to $2.5 billion. Our estimate was $2.6 billion.
Net premiums written rose 46.9% year over year to $1.7 billion on increases in property catastrophe, property excluding property catastrophe and other specialty lines, due in part to rate increases, new business opportunities and growth in existing accounts as well as lower level of retrocession activity. Our estimate was $1.5 billion.
Underwriting income was $245 million, up 75% year over year. Our estimate was $313.4 million.
The combined ratio improved 350 bps year over year to 81.9. Our estimate was 73.3. The Zacks Consensus Estimate was pegged at 79.
Mortgage: Gross premiums written dropped 6.7% year over year to $347 million. Our estimate was $373.8 million.
Net premiums written decreased 9.9% year over year to $265 million on account of lower originations in the Australian market and a decrease in U.S. primary mortgage insurance business, which was partially offset by a higher volume of credit risk transfer transactions. Our estimate was $315.1 million.
Underwriting income dropped 15.4% year over year to $253 million. Our estimate was $200.5 million.
The combined ratio deteriorated 1650 bps to 15%. Our estimate was 7.5. The Zacks Consensus Estimate was pegged at 18.8.
Financial Update
Arch Capital exited 2022 with cash of $904 million, which increased 5.7% from 2021-end.
Debt was $2.7 billion as of Jun 30, 2023, up 0.04% from 2022-end.
As of Jun 30, 2023, the book value per share was $37.04, up 13.5% from 2021-end.
Annualized operating return on average common equity expanded 440 basis points to 21.5%. Cash from operations of $1.2 billion improved 27.6% year over year.
The Travelers Companies (TRV - Free Report) reported second-quarter 2023 core income of 6 cents per share, which missed the Zacks Consensus Estimate of $2.27. The bottom line decreased 97.7% year over year, primarily attributable to higher-than-expected catastrophe loss.
Travelers’ total revenues increased 9.8% from the year-ago quarter to $10.1 billion, primarily driven by higher premiums. The top-line figure was almost in line with the Zacks Consensus Estimate.
Net written premiums increased 14% year over year to a record $10.3 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.1 billion.
Travelers witnessed an underwriting gain of $781 million, up 38% year over year, driven by record net earned premiums of $9.2 billion and a consolidated underlying combined ratio, which improved 170 basis points. The combined ratio deteriorated 820 basis points year over year to 106.5 due to higher catastrophe losses and lower net favorable prior-year reserve development, partially offset by a lower underlying combined ratio.
The Progressive Corporation’s (PGR - Free Report) second-quarter 2023 earnings per share of 50 cents missed the Zacks Consensus Estimate of 88 cents. The bottom line declined 47.4% year over year.
Net premiums earned grew 19% to $14.5 billion and beat our estimate of $12.9 billion as well as the Zacks Consensus Estimate of $14.3 billion. The combined ratio deteriorated 480 bps from the prior-year quarter’s level to 104.
Policies in force were solid in the Personal Auto segment, increasing 17% from the year-ago month’s figure to 19.7 million. Special Lines improved 7% to 5.8 million.
W.R. Berkley Corporation’s (WRB - Free Report) second-quarter 2023 operating income of $1.14 per share beat the Zacks Consensus Estimate by 6.5%. The bottom line increased 1.8% year over year.
Operating revenues came in at $2.9 billion, down 57.4% year over year, on the back of higher net premiums earned as well as higher net investment income. The top line missed the consensus estimate by 1.2%.
W.R. Berkley’s net premiums written were a record $2.8 billion, up 8.7% year over year, as market conditions remained favorable for most lines of business. Our estimate for the same was $2.7 billion.
Catastrophe losses totaled $53.5 million in the quarter. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 100 basis points to 89.6, in line with the Zacks Consensus Estimate. Our estimate for the combined ratio was 91.3.
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Arch Capital (ACGL) Q2 Earnings & Revenues Beat, Rise Y/Y
Arch Capital Group Ltd. (ACGL - Free Report) reported second-quarter 2023 operating income of $1.92 per share, beating the Zacks Consensus Estimate by 16.4%. The bottom line increased 43.3% year over year.
The results benefited from improved premiums and higher net investment income on the back of improved Insurance and Reinsurance segment performance.
Arch Capital Group Ltd. Price, Consensus and EPS Surprise
Arch Capital Group Ltd. price-consensus-eps-surprise-chart | Arch Capital Group Ltd. Quote
Behind the Headlines
Gross premiums written improved 25.2% year over year to $4.8 billion.
Net premiums written climbed 27.7% year over year to $3.4 billion on higher premiums written across its Insurance and Reinsurance segments and beat our estimate of $3.1 billion.
Net investment income increased 128.3% year over year to $242 million and beat our estimate of $115.3 million. It was driven by higher interest rates and growth in invested assets, which benefited from strong operating cash flows. The Zacks Consensus Estimate was pegged at $185 million.
Operating revenues of $3.2 billion rose 32.6% year over year, driven by higher net premiums earned and net investment income. It beat the Zacks Consensus Estimate by 2.3%.
Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $119 million.
Arch Capital’s underwriting income increased 13.1% year over year to $606 million. Our estimate was $686.8 million.
The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 270 basis points (bps) to 79.8. Our estimate was 74.1. The Zacks Consensus Estimate was pegged at 8.
Segment Results
Insurance: Gross premiums written increased 14.7% year over year to $2 billion. Our estimate was $2.1 billion.
Net premiums written climbed 18.4% year over year to $1.5 billion, driven by increases in most lines of business, due in part to new business opportunities, increases in existing accounts and rate changes as well as more business in the reported quarter. Our estimate was $1.3 billion.
Underwriting income of $108 million was 11.3% higher than the year-ago number. Our estimate was $173 million. The combined ratio deteriorated 80 bps to 91.9. Our estimate was 85.2.while the Zacks Consensus Estimate was pegged at 90.
Reinsurance: Gross premiums written improved 41.9% year over year to $2.5 billion. Our estimate was $2.6 billion.
Net premiums written rose 46.9% year over year to $1.7 billion on increases in property catastrophe, property excluding property catastrophe and other specialty lines, due in part to rate increases, new business opportunities and growth in existing accounts as well as lower level of retrocession activity. Our estimate was $1.5 billion.
Underwriting income was $245 million, up 75% year over year. Our estimate was $313.4 million.
The combined ratio improved 350 bps year over year to 81.9. Our estimate was 73.3. The Zacks Consensus Estimate was pegged at 79.
Mortgage: Gross premiums written dropped 6.7% year over year to $347 million. Our estimate was $373.8 million.
Net premiums written decreased 9.9% year over year to $265 million on account of lower originations in the Australian market and a decrease in U.S. primary mortgage insurance business, which was partially offset by a higher volume of credit risk transfer transactions. Our estimate was $315.1 million.
Underwriting income dropped 15.4% year over year to $253 million. Our estimate was $200.5 million.
The combined ratio deteriorated 1650 bps to 15%. Our estimate was 7.5. The Zacks Consensus Estimate was pegged at 18.8.
Financial Update
Arch Capital exited 2022 with cash of $904 million, which increased 5.7% from 2021-end.
Debt was $2.7 billion as of Jun 30, 2023, up 0.04% from 2022-end.
As of Jun 30, 2023, the book value per share was $37.04, up 13.5% from 2021-end.
Annualized operating return on average common equity expanded 440 basis points to 21.5%. Cash from operations of $1.2 billion improved 27.6% year over year.
Zacks Rank
ACGL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
The Travelers Companies (TRV - Free Report) reported second-quarter 2023 core income of 6 cents per share, which missed the Zacks Consensus Estimate of $2.27. The bottom line decreased 97.7% year over year, primarily attributable to higher-than-expected catastrophe loss.
Travelers’ total revenues increased 9.8% from the year-ago quarter to $10.1 billion, primarily driven by higher premiums. The top-line figure was almost in line with the Zacks Consensus Estimate.
Net written premiums increased 14% year over year to a record $10.3 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.1 billion.
Travelers witnessed an underwriting gain of $781 million, up 38% year over year, driven by record net earned premiums of $9.2 billion and a consolidated underlying combined ratio, which improved 170 basis points. The combined ratio deteriorated 820 basis points year over year to 106.5 due to higher catastrophe losses and lower net favorable prior-year reserve development, partially offset by a lower underlying combined ratio.
The Progressive Corporation’s (PGR - Free Report) second-quarter 2023 earnings per share of 50 cents missed the Zacks Consensus Estimate of 88 cents. The bottom line declined 47.4% year over year.
Net premiums earned grew 19% to $14.5 billion and beat our estimate of $12.9 billion as well as the Zacks Consensus Estimate of $14.3 billion. The combined ratio deteriorated 480 bps from the prior-year quarter’s level to 104.
Policies in force were solid in the Personal Auto segment, increasing 17% from the year-ago month’s figure to 19.7 million. Special Lines improved 7% to 5.8 million.
W.R. Berkley Corporation’s (WRB - Free Report) second-quarter 2023 operating income of $1.14 per share beat the Zacks Consensus Estimate by 6.5%. The bottom line increased 1.8% year over year.
Operating revenues came in at $2.9 billion, down 57.4% year over year, on the back of higher net premiums earned as well as higher net investment income. The top line missed the consensus estimate by 1.2%.
W.R. Berkley’s net premiums written were a record $2.8 billion, up 8.7% year over year, as market conditions remained favorable for most lines of business. Our estimate for the same was $2.7 billion.
Catastrophe losses totaled $53.5 million in the quarter. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 100 basis points to 89.6, in line with the Zacks Consensus Estimate. Our estimate for the combined ratio was 91.3.